Haitong International: Tencent is expected to remain stable in the fourth quarter of last year and maintain high-quality growth this year

Haitong International published a research report, maintaining an "Outperform" rating on Tencent Holdings (00700.HK) with a target price of HKD 700. The report anticipates that Tencent will maintain robust performance in the fourth quarter of 2025 and is optimistic about its high-quality growth continuing into the fiscal year 2026.

The firm broadly maintains its performance forecast for Tencent in the fourth quarter, expecting total revenue to reach RMB 195 billion, a year-on-year increase of 13%, with non-International Financial Reporting Standards operating profit expected to be RMB 68 billion, a year-on-year increase of 15%.

Looking ahead to the fiscal year 2026, Tencent's game product line is rich, including key overseas titles such as "Honor of Kings World" and "Valorant" mobile game, as well as a series of mid-sized games like "Under the Red Sky," "RUST," "Monster Hunter: Travelers," and "Rainbow Six." The firm predicts that game revenue for the fourth quarter of 2025, the full year of 2025, and the full year of 2026 will be RMB 58 billion, RMB 241 billion, and RMB 264 billion respectively, with year-on-year growth of 18%, 22%, and 10%.

In terms of advertising business, Video Accounts, Search, and Mini Programs continue to be the three major growth engines, with AI technology continuously empowering them. Mini Programs, as e-commerce platforms and channels for distributing game and micro-short drama content, drive rapid growth in related advertising. The firm expects advertising revenue to reach RMB 42 billion, RMB 145 billion, and RMB 172 billion in the fourth quarter of 2025, the full year of 2025, and the full year of 2026 respectively, with year-on-year growth of 19%, 20%, and 18%.

Haitong International believes that high-quality growth will continue into the fiscal year 2026. Although capital expenditures may accelerate in 2026 and put pressure on profit margins, driven by high-profit new business lines, a slight profit margin expansion is still expected. The firm predicts that adjusted operating profit for the fourth quarter of 2025, the full year of 2025, and the full year of 2026 will be RMB 68 billion, RMB 280 billion, and RMB 312 billion respectively, with year-on-year growth of 15%, 18%, and 12%